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Whidbey Island Bank prospers in bad times
Fifty years ago this month, a seed of sorts was planted in the small farming town of Coupeville.
A group of business leaders and farmers started their own community bank, the first such bank on Whidbey Island. As the story goes, they wanted a bank run by local people which would invest in the local economy.
They called it Whidbey Island Bank. It opened with four full-time employees at the single Coupeville branch.
Today, Whidbey Island Bank is no longer a small bank, but a banking corporation that has had astonishing success and growth at a time of historic failures in the banking sector. The bank, now headquartered in Oak Harbor, has 30 branches, 460 full-time employees and is considered one of the best performing banks in the Northwest.
Still, it remains at its heart a community bank. Jack Wagner, president and CEO of Whidbey Island Bank, pointed out that about 500 people attended the bank’s 50th birthday party at the original Coupeville branch earlier this month.
“We are gratified by the support and will continue to work with the community to make good things happen in the future,” he said.
Retired Oak Harbor businessman Bud Wallgren is a long-time member of the bank’s board of directors and past chairman. He said one of the keys to the bank’s success has been the involvement in the community. While the bank financially supported parades, festivals and civic efforts like the construction of the Oak Harbor High School stadium, the employees have filled vital roles in charities, foundations and other organizations.
“We’ve tried to treat the community as a partner, not just a client,” Wallgren said. “You really have to earn the trust of the people and I think we’ve done that by treating them fairly.”
Likewise, former CEO Mike Cann points to “a great group of people” who piloted the company through the years.
“They were very committed to what we wanted to accomplish, which was to serve the shareholders and help the community grow,” he said.
In addition, Wagner credits the bank’s values, which started with the founders, as the secret of success.
“I think it comes down to the philosophy of the management team. We’ve remained conservative,” he said. “Instead of following the rest of the industry and going whole hog, we stuck to our guns.”
It’s a philosophy that has apparently worked as the bank has seen remarkable growth. Shareholders have seen their investment multiply. The parent company, Washington Banking Company, is publicly traded on the Nasdaq under the ticker symbol WBCO. There were 170 original shareholders with a total of 3,000 shares of capital stock outstanding. Of those, 99 were Whidbey Island residents and the rest had connections to the island.
According to Shelly Angus, senior vice president of investor relations, the original shareholders spent $40 on one share of stock. Today, the total valuation of that stock, with growth in shares and cash dividends, would be $10,515.
While hundreds of banks failed during the recession, Whidbey Island Bank only got stronger. Wagner said the bank management team prepared for the end of the real estate bubble and the start of the financial crisis. They set up a “game plan” in 2008 to take advantage of failing banks; it’s a strategy that paid off.
Last year, the bank purchased two failing banks: City Bank of Lynnwood and North County Bank of Arlington. The purchase brought Whidbey Island Bank a dozen additional branches and a much larger footprint in Snohomish County. Wagner said the management is still on the look-out for more banks to acquire, but nothing has come up so far this year.
But the takeovers came with challenges. The bank’s “troubled asset ratio” skyrocketed with the purchase of the banks. Wagner said the failed banks had a lot of bad construction and development loans, but most of the troubled assets were covered by the FDIC. He said the ratio should go down rapidly as the bank’s special asset group works through all the bad loans.
“We have capital enough to afford all this,” he said. “The government wouldn’t have allowed us to acquire the banks if we weren’t very healthy and well run.”
Recent years have been stellar for the bank. “We’re basically doubled in size in the last three years,” Wallgren said.
The bank increased its number of branches from 18 to 30 and grew total assets 63 percent year-over-year to $1.7 billion. It is now the seventh largest bank headquartered in the state. The Seattle Times’ “Best of the Northwest” publication named Whidbey Island Bank as the top performing bank in both 2009 and 2010. The newspaper also rated the company as No. 6 on the list of the “20 Companies of the Decade.”
And the accolades only continue. This year Washington Banking Company was selected to the KBW Bank Honor Roll with just 39 other banking institutions from around the nation for generating superior 10-year track records. Washington Banking Company was the only bank from the Northwest to receive this honor. The Puget Sound Business Journal ranked Washington Banking Company as the third fastest growing public company headquartered in Washington for the three-year period from 2008-2010 based on revenue growth. Washington Banking Company was the only banking company earning a spot in the top 10.
The bank took part in the federal government’s Troubled Asset Relief Program, which Wagner said helped them to purchase the failing banks. But even with the complicated acquisitions, the bank was able to repay the $26.4 million at the beginning of the year.
Wagner concedes that the loan business is very slow as the economy continues to sputter, but he’s hopeful things will pick up in the second half of the year.
“We have more liquidity, more capital than we really need,” he said.
For the banking world, it’s an enviable position to be in.